← All Glossary Terms
Definition
Debt consolidation combines multiple high-interest debts into a single loan or payment structure, typically with a lower blended interest rate. Common approaches: a personal consolidation loan (10–20% APR vs. 20–29% credit card rates), a balance transfer credit card with a 0% intro APR period, a home equity loan or HELOC, or a Debt Management Plan (DMP) through an NFCC-certified nonprofit credit counselor. Unlike debt settlement, consolidation does not reduce the principal owed — it restructures payment terms and interest costs. DMPs typically negotiate credit card APRs down to 6–9% from 18–29%, enabling consumers to become debt-free in 36–60 months while preserving their credit score.
Also Known As
bill consolidation
balance consolidation
debt rollup
debt management plan (DMP)
Used in Context
- By consolidating five credit cards totaling $28,000 into a 4-year personal loan at 14% APR, the borrower reduced monthly payments by $310 and saved $6,200 in total interest.
- The nonprofit credit counselor enrolled the client in a Debt Management Plan at 7% blended APR — significantly below the 24% average they were paying — and the client was debt-free in 48 months without damaging their credit.
- Home equity consolidation was the lowest-rate option at 8.5%, but the financial advisor cautioned that converting unsecured credit card debt into secured home equity debt put the house at risk if payments were missed.
Ready to compare debt relief options?
Free quotes from licensed experts — no spam, no obligation, results in 60 seconds.
Get Free Quotes →